Each business day, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.
This list is based on data from the close of the previous trading session. Today, fast-growth stocks are in the spotlight. These are stocks of companies that are projected to increase revenue and profit by at least 12% in the coming year and rank near the top of all stocks rated by our proprietary quantitative model, which looks at over 60 factors.
In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. Please note that definitions of revenue vary by industry, and this screen does not make adjustments for acquisitions, which can materially affect posted results. Likewise, earnings-per-share growth may be affected by accounting charges, share repurchases and other one-time items.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.
American Ecology Corporation
is one of the nation's oldest providers of radioactive, hazardous and industrial waste management services.
We have rated American Ecology a buy since October 2005. Strengths such as revenue growth, a largely solid financial position and a notable return on equity influenced this rating. For the first quarter of fiscal 2008, American Ecology's revenue rose by 18.6% year over year. This growth appears to have trickled down to the bottom line, improving earnings per share by 18.5% over the first quarter of 2007. In fact, the company has demonstrated a pattern of positive EPS growth over the past two years. A slight improvement in return on equity can be seen as a modest strength for the company. Finally, while total debt increased slightly year over year, it remains at an almost negligible level.
Looking ahead, the company anticipates fiscal 2008 earnings to be in the range of $1.17 to $1.23 per diluted share. This estimate is based on the company's record first-quarter results and its strong outlook for the second quarter. Additionally, we feel that American Ecology's strengths outweigh the fact that the company currently shows weak operating cash flow.
manufactures and markets flow measurement and control products. These products measure a variety of liquids, such as water, oil and lubricants.
Badger has been rated a buy since August 2003. The company's strengths include its revenue growth, net income growth and solid return on equity. For the second quarter of fiscal 2008, Badger's revenue rose by 20.1% year over year. This growth appears to have trickled down to the bottom line, boosting earnings per share by 23.1%. Net income increased by 28.8% over the same period, rising from $5.47 million a year ago to $7.04 million. Finally, return on equity also improved slightly in the quarter from 18.06% to 22.15%.
Investors have begun to recognize Badger's strengths, including earnings growth. As a result, the company's shares have risen by a sharp 62.75% over the past year. While this makes the stock somewhat expensive compared with the rest of its industry, we felt that the company's strengths justify the higher price levels at this time. Bear in mind, however, that Badger's future performance could be affected by any regulatory changes, especially those dealing with the use of lead, which is used in the manufacture of certain meters, or the use and/or licensing of radio frequencies necessary for the company's automatic meter reading and advanced metering infrastructure products. Badger's future results could also be affected by the overall health of the U.S. economy, including housing starts and overall industrial activity and any changes in foreign economic conditions, including currency exchange rates.
manufactures highly engineered products and materials for the chemical, industrial, energy, transportation and infrastructure markets worldwide.
Ameron has been rated a buy since June 2005. Strong performances from the Fiberglass-Composite-Pipe Group and Tamco (Ameron's 50%-owned steel mini-mill) led to higher results in the second quarter of fiscal 2008. The company reported a slight revenue increase of 1.9% year over year, which appears to have helped boost earnings per share from $1.63 in the second quarter of fiscal 2007 to $1.78 in the most-recent quarter. Net income increased 3.4% when compared with the same quarter one year prior, rising from $15.80 million to $16.33 million. Return on equity also improved slightly and the company appears to be successfully managing its debt levels.
Management was overall pleased with the year-to-date results, as the company's performance for the first half of fiscal 2008 was positive. The company anticipates steady returns for the year from its various businesses, with Tamco and the Fiberglass-Composite-Pipe Group expected to continue performing at record levels. However, weak market conditions will most likely continue to negatively affect the Infrastructure Products Group. Bear in mind that the building products industry's performance is cyclical, depending on the overall health of the U.S. economy. The state of the housing and auto markets in particular could impact this industry and, therefore, this stock.
manufactures electronic instruments and electromechanical devices. The company has operations throughout the United States and in more than 30 other countries. The company's Electronic Instruments segment manufactures advanced monitoring, testing, calibrating and display instruments for the process, aerospace, power and industrial markets worldwide. The Electromechanical segment produces highly engineered electromechanical connectors for hermetic (moisture-proof) applications, specialty metals for niche markets, and brushless air-moving motors, blowers and heat exchangers. The products are used in floor care and other specialty applications.
Ametek has been rated a buy since November 2002. The company's strengths include its consistent revenue, earnings per share and net income growth, as well as its solid stock performance. In addition, Ametek's minimal exposure to the housing and automobile markets could insulate it from the sluggish U.S. economy. For the second quarter of fiscal 2008, the company reported a 13.5% increase year-over-year in earnings, led by top-line growth and operational improvements. Continuing its pattern of EPS growth over the past two years, the company reported a 13.0% EPS improvement in the second quarter. Net income grew to $65.84 million from $58.01 a year ago. Furthermore, operating cash flow increased 39.0% to $77 million. During the second quarter, Ametek announced the acquisition of
, a privately held manufacturer of high-speed digital imaging systems used for motion capture and analysis in numerous test and measurement applications. Additionally, the company paid a quarterly dividend of 6 cents per share.
The company cited strong conditions in its key markets and solid second-quarter results as the basis for raising its full-year 2008 EPS estimate to a range of $2.50 to $2.54 per share. Revenue is estimated to grow about 20% over the full year of 2007. Looking ahead to the third quarter of fiscal 2008, management anticipates a sales increase of approximately 20%, along with EPS in the range of 61 cents to 63 cents per share. However, these results could be negatively affected should the company fail to successfully integrate its recent acquisitions. Other risks include the price and availability of raw materials and changes in the competitive environment.
Diamond Offshore Drilling
engages in the contract drilling of oil and gas wells. The company's fleet of 30 submersibles enables it to offer a range of services in various markets worldwide, including the deep water, harsh environment and conventional semisubmersible markets.
We have rated Diamond a buy since June 2005, on the basis of various strengths displayed by the company. Fueled by tight supply and high demand for its rigs, Diamond's earnings rose 65.2% year over year in the second quarter of fiscal 2008. Revenue increased 47.1%, boosted by sales from Diamond's Contract Drilling segment. Net income for the quarter increased to $416.28 million, or $2.99 per share, from $251.93 million, or $1.81 per share, in the second quarter of fiscal 2007. During the quarter, the company received Letters of Intent for four semisubmersible rigs, which could be worth maximum revenue totaling $900 million and 6.5 rig years of work.
The company's strong earnings growth, among other factors, helped increase Diamond's stock price over the past year. Although the company may harbor some minor weaknesses, we feel that they are unlikely to offset the company's strengths. Instead, we feel that the slowdown in the U.S. economy could put pressure on the demand for oil and gas. This could in turn disturb activities related to exploration and production, affecting the number of rigs that are operational in the market and potentially affecting Diamond's future profitability.
Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks.
However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.
For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.